Elkem says U.S.-China trade war to hit fourth-quarter earnings

OSLO (Reuters) - Oslo-listed Elkem (ELK.OL), which makes products used in steel, aluminium and chemicals, warned on Wednesday that earnings would weaken in the fourth quarter as the impact from U.S. trade tariffs against China was stronger than expected.

The news sent the company’s shares tumbling 10 percent by 0705 GMT as it said fourth-quarter earnings could be more than 10 percent below third-quarter earnings.

Based in Norway but majority owned by China National Bluestar since 2011, Elkem makes ferroalloys for steelmakers and silicon for aluminium as well as silicones that are used in industrial and consumer products, and other materials.

While fundamental market demand is expected to be good in coming quarters, inventories for silicones in China have increased recently - as Chinese producers faced tariffs on exports to the United States - and prices for silicones commodities have declined significantly during October, Elkem said.

“The effect of U.S. trade tariffs imposed on imports from China has been more significant than expected and further impact is unclear. Particularly for silicones, prices are expected to be lower in the fourth quarter,” Elkem said in a statement.

“On this basis, the fourth quarter result is expected to be clearly weaker than the third quarter result,” it said.

The company declined to specify how much it expected earnings to fall, but told an earnings presentation it would be by “more than 10 percent” below the third-quarter level.

Elkem’s shares were down 10 percent at 28 Norwegian crowns by 0705 GMT, underperforming a 0.7 percent rise in the Oslo benchmark index

The company reported a 14 percent year-on-year increase in third-quarter revenues to 6.05 billion Norwegian crowns (562.3 million pounds), but that was down from 7.12 billion in the second quarter.

Earnings before interest, tax, depreciation and amortisation (EBITDA) rose to 1.39 billion from 858 million crowns a year ago, but lagged the 1.97 billion reported for the April-June quarter.

Separately, Norwegian company REC Silicon (REC.OL), a supplier to the solar industry, said it would continue to idle production capacity and reduce its workforce as a result of the ongoing trade friction between the world’s two largest economies.

“REC Silicon’s sales opportunities continue to be limited by restricted access to the Chinese markets because of the trade war between China and the United States,” it said on Wednesday.(This version of the story refiles to clarify refers to impact of trade tariffs in first paragraph.)